Deck 16: Federal Taxation and Real Estate Finance

Question 1

16-16.The following tax law has an effect on the value of real estate:

A) capital gains treatment
B) length of depreciation for real property
C) passive loss limitation
D) all of above
E) none of above

Answer 1

all of above

Question 2

16-15.The following will negatively affect real estate as a tax shelter:

A) extension of the depreciation period
B) introduction of a lower rate on capital gains
C) elimination of passive loss limitation
D) all of the above
E) none of the above

Answer 2

extension of the depreciation period

Question 3

16-12.Section 1031 limits the amount of personality included in an exchange to ______________________ of the aggregate value of the replacement property:

A) 15%
B) 18%
C) 20%
D) 25%
E) none of the above

Answer 3

25%

Question 4

16-11."Boot" refers to:

A) cash
B) non-like-kind property
C) relief of debt
D) all of the above
E) a and c

Question 5

The Tax Act of 1993 raised the marginal tax rates on ordinary income to:

A) 28%
B) 39.6%
C) 51.8%
D) 42.5%

Question 6

16-13.Passive loss limitation rules allow active participants in a real estate investment to offset up to _________________ of income from other classes:

A) $15,000
B) $25,000
C) $30,000
D) $50,000
E) none of the above

Question 7

Generally,the capital loss limitation rule allows taxpayers to offset capital losses against:

A) ordinary income
B) capital gains
C) passive gains
D) portfolio income

Question 8

A test that determines if the original issue discount (OID)rules apply is the:

A) time value of money test
B) adequacy of interest test
C) risk-return test
D) a and b
E) b and c

Question 9

16-17.Presently the tax laws that favor investment in real estate include those related to:

A) passive loss limitation
B) depreciation write-off
C) low income housing
D) capital gains

Question 10

Tax law changes that would affect the value of real estate include:

A) changes in marginal rates (bracket rates)
B) changes in depreciation allowance
C) changes in capital gains rates
D) all of the above

Question 11

Factors that affect the value of tax savings from depreciation include:

A) amount of depreciation
B) acceleration of depreciation
C) the marginal tax rate
D) all of the above

Question 12

Income from a limited partnership is classified as:

A) active
B) passive
C) portfolio
D) deferred

Question 13

Alternative Minimum Tax rules were established in:

A) 1978
B) 1986
C) 1991
D) 1993
E) none of the above

Question 14

For a real estate partnership investment the "at-risk" amount is:

A) the investor's cash contribution
B) tax basis of any property contributed
C) non-recourse debt borrowed from the partnership
D) a plus b plus c
E) a plus b

Question 15

Loan discount points:

A) lower the effective yield to the lender
B) raise the effective yield to the lender
C) have no effect on the effective yield but raises the contract rate
D) none of the above

Question 16

16-10.The major changes incorporated in the Tax Reform Act of 1986 were:

A) lengthening the period of depreciation
B) defining real estate income as passive income
C) lowering the top marginal tax rate
D) all of the above
E) a and b

Question 17

16-14.A tax credit is given for investing in:

A) rehabilitating historic structures
B) personal residence for disabled people
C) low-income housing
D) all of the above
E) a and c